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Empowering Decisions
July 10, 2018

Supplier management IS contract management — and vice versa.

Supplier management IS contract management — and vice versa.

Good contracts make good relationships.

Interesting snippet from a Gallup article (undated) that I read recently: Gallup finds that customers increasingly expect suppliers to possess the deepest and timeliest information on their most important business issues. These include the economics of customers’ businesses, emerging challenges within customers’ industries and trends within a supplier’s customer portfolio . What’s interesting is that they refer to supplier/customer dynamics as “partnerships” instead of just “relationships.” Optimizing those partnerships requires integrated supplier management and contract management.

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It is a constant refrain in our industry that supplier relationships are some of the most valuable “assets” a company can have. So are contracts. It stands to reason that the two have a crucial bearing on each other. Not only for the relationship aspect, but because third party and supplier management is critical for a continuous process of managing compliance and mitigating risk. According to CIPS (The Chartered Institute of Purchasing and Supply), successful contract management is most effective if upstream or pre-award activities are properly carried out. This proactive stance puts contract management, of not on the task list, at least on the radar of sourcing and procurement teams throughout an organization.

Establishing supplier relationship guardrails with contract management.

Tim Cummins, President of IACCM (The International Association for Contract and Commercial Management), wrote an article on the Most Negotiated Procurement Terms 2018 for the Procurement and Supply Australasia (PASA) website. He covered a lot of ground, including attitudes towards contracts and negotiations in general. While not so much adversarial, there seems to be a persistent “us and them” approach to establishing the contract (and relationship), rather than setting a basis for mutual benefit. Unfortunately, there doesn’t seem to be much movement toward changing the conversation.

In the Gallup piece, they focused on the effort to become and maintain a “customer of choice” standing, which speaks to a more reciprocal type of relationship with third parties — suppliers, vendors, consultants, etc. All good relationships are based on trust, which can be earned over time or established from day one. When transparency and trust become part of the onboarding process from the beginning — by integrating supplier management and contract management — then the relationship can start as one of mutual benefit (and gain) and grow from there. In fact, Gallup finds that when customers strongly agree that their supplier is a trusted adviser, they produce 1.5 times greater revenue. That’s not chump change.

Since third parties and contracts are both managed based on lifecycles, that speaks to the changing nature of the relationships for both. Having a single source of integrated Master Data that feeds both supplier and contract management is what makes it possible to monitor things like obligations, milestones, opportunities, etc. Having a significant automation component also frees up teams to focus on ways to enhance the relationships, not spend their time mired in minutiae.

If you’d like to better manage your third party relationships with integrated contract management and supplier management, schedule a personalized demonstration of the modular solutions on the Determine Cloud Platform.

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